Mitigating Shari'ah Risk through Hiyal (Legal Stratagems): A Classical and Effective Technique.

Rafique, Muhammad Omer; Uddin, Imam; Abdullah, Ahmad Sufyan Che; Fatoni, Mohd Abd Wahab

Hiyal (legal stratagems) means to find an unconventional way to meet an end in a complicated Shari'ah issue. It has a wide application in today's versatile cutting-edge Shari'ah matters to avoid the Shari'ah non-compliance risk. It is the risk of financial damages suffered by IFIs as a result of non-compliance with Shari'ah principles in their operations. These stratagems should comply with the Maqasid-e-Shari'ah to remain legal. The research objective of this study is to explore the application of Hiyal (legal stratagems) in Islamic financial institutions in mitigating and managing Shari'ah non-compliance risk. The study uses the content analysis method to achieve its objective. The study finds that Islamic finance scholars have developed the Hiyal theory that is well applied as a solution to manage this special kind of risk. Keeping these Hiyal within the limits of Shari'ah is a real challenge. That is why the application is criticized by other jurists for advising such relaxed Hiyal. Several cases from classical jurists' scriptures as well as from AAOIFI standards are discussed and analyzed to assess how this technique is useful in managing the Shari'ah non-compliance risk.

ISLAMIC law; EVASION (Islamic law); FINANCIAL institutions; ISLAMIC finance; ACCOUNTING & Auditing Organization for Islamic Financial Institutions

COMSATS Journal of Islamic Finance (CJIF), 2021, Vol 6, Issue 2, p41

2519-707X

Academic Journal

10.26652/cjif.6202123